This paper introduces a simple rule for appraising the economic soundness of fiscal policies. It connects fiscal policy to a long-run debt objective, taken as an anchor, while arbitraging symmetrically between this debt objective and output stabilisation. The rule offers a benchmark to assess the evolution of primary expenditure, net of the impact of discretionary revenue measures, taken as a proper operational target for annual fiscal policy. The properties and implications of this rule of thumb are analysed drawing on qualitative arguments and retrospective simulations.
|KC-AI-14-526-EN-N (online)||KC-AI-14-526-EN-C (print)|
|ISBN 978-92-79-35175-4 (online)||ISBN 978-92-79-36140-1 (print)|
|doi:10.2765/70540 (online)||doi:10.2765/80362 (print)|
Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.